If so, you’ll enjoy many benefits that streamline day-to-day operations—but there are some downsides to be aware of too. But that doesn’t mean you need a formal business entity or history of business income — a side hustle or hobby that occasionally brings in revenue may be enough to qualify. However, it mostly helps determine factors like your credit limit — not whether you can get a business credit card at all. Business credit cards are intended for business use only and are a great way to separate your personal and company expenses. Use your business credit card responsibly in order to maximize all the benefits that it can offer you.

Corporate card holders are eligible for commercial liability, which means only the corporation is responsible for its credit card debts. There are a few things to consider before selecting a business credit card. Some credit card issuers may require additional documents, such as financial statements, to verify your business’s creditworthiness.

Best Business Credit Cards

Once you have a business credit file with a commercial credit reporting agency, a business credit report on your company can be created and sold to others who wish to review it. You must own an established business in order to qualify for a business credit card. You’ll likely need to provide your employer identification number, social security number, and other business information in order to apply. Companies can use small business cards regardless of size, annual revenue, or number of cardholders, which makes them appealing to small business owners and sole proprietors. Many small business owners opt to open this type of credit card in order to simplify finances, gain legal protections, and earn rewards. Business credit cards also aren’t covered by consumer protection laws that set limits on fees and interest for consumer cards.

• When you apply for this loan, lenders will look at your business credit for reference on your business’s finances as part of the application process.
• In addition, business credit cards sometimes offer more flexible repayment terms, designed to appeal specifically to businesses whose cash flow may be irregular.
• Also, business cards do not enjoy the protections granted by the CARD Act of 2009.
• You’ll need to provide your SSN or ITIN so card issuers check your creditworthiness and verify your identity.
• Likewise, if you run your own business, a business credit card can help you pay for expenses required to purchase supplies and run your day-to-day operations.
• That could include a “hard inquiry” on your personal credit history, which often results in a temporary drop of a few points in your credit score.

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Definition and Examples of Business Credit

Even if you do pay the minimum, your rest of your outstanding balance will remain and carry over to the next month, accruing interest the more you don’t pay it off. This is why it’s best to pay off your entire balance if you can, to avoid paying more interest and accumulating business credit card definition debt. All users of our online services are subject to our Privacy Statement and agree to be bound by the Terms of Service. The material made available for you on this website is for informational purposes only and is not intended to provide legal, tax or financial advice.

If you apply for a credit card, the lender may use a different credit score when considering your application for credit. The higher the credit score, the better interest rates and lines of credit you might be considered for if you ever want to apply for a business loan or other kinds of financing. When it comes to business relationships, this score may even act as a signal to potential vendors, suppliers and other strategic business partners on how your business manages its credit.

Revenue and Expenses

When making a decision about which type of card to choose, it’s important to consider factors such as business needs, revenue, and number of employees. It provides easy access to credit, a financial cushion, and a way to separate business expenses from personal credit card expenses. That said, it can also be potentially dangerous and should be used with caution.

It’s not always the best choice, especially for large expenditures that can’t be paid in full before interest kicks in. Using a business credit card for large purchases that can’t be fully paid for before the interest charges kick in can be very expensive. Business credit can be generated from businesses that are registered as separate legal entities, such as a limited liability company (LLC) or a corporation. The business functions as a separate legal entity and is identified by its own employer identification number (EIN), which works like a Social Security number when acquiring loans and submitting tax returns. Understanding how to build your business credit early on can help provide more options for financial assistance. It can also make it easier to separate your business’s credit and financial obligations from your own personal credit.